When you buy shares of a company, you get proof of ownership from the company. This proof can be in the form of a Share Certificate or a Share Warrant. Both look similar as they represent ownership of shares, but they are very different in meaning, legal value, and usage.
In this blog, we will explain in easy and simple words what a share certificate is, what a share warrant is, and how they differ from each other.
What is a Share Certificate?
A Share Certificate is a legal document that a company gives to its shareholders. It shows that the person whose name is written on it owns certain shares of the company.
Features of a Share Certificate:
- Issued in the name of a person – It belongs to the person whose name is written on it.
- Proof of ownership – It clearly shows that the person is the legal owner of the shares.
- Mandatory for companies – Every company must issue a share certificate within a fixed time after the shares are allotted or transferred.
- Transferable with process – If the shareholder wants to sell the shares, a legal process is followed (transfer deed or demat transfer).
- Available in physical or electronic form – Today, most companies issue electronic certificates (demat).
Details in a Share Certificate:
- Company name and address
- Name of shareholder
- Number of shares owned
- Value of each share
- Distinctive numbers of shares
- Signatures of company officials
So, a share certificate is like an official receipt and proof that you own shares in a company.
What is a Share Warrant?
A Share Warrant is a different kind of document. It is a bearer instrument, which means that whoever holds it is considered the owner of the shares mentioned in it. Unlike a share certificate, it is not issued in the name of a person but to the “bearer.”
Features of a Share Warrant:
- Issued to the bearer – It belongs to whoever has it in hand.
- Freely transferable – It can be sold or passed on simply by handing it over to another person. No need for any legal transfer form.
- Issued only by public companies – Private companies cannot issue share warrants.
- Needs government approval – In India, companies needed approval from the Central Government to issue them.
- May have dividend coupons – A share warrant often comes with coupons. The holder can present these coupons to the company and claim dividends.
- Rarely used today – They are almost outdated because of legal restrictions and risks of misuse.
Details in a Share Warrant:
- Company name
- Number and type of shares it represents
- Value of shares
- Warrant number
- Coupons for dividends (in some cases)
So, a share warrant is more like a negotiable instrument, something you can trade easily without much paperwork.
Legal Rules
- Share Certificates – Governed by the Companies Act, 2013. Every company limited by shares must issue share certificates within 60 days of allotment or transfer.
- Share Warrants – Allowed under the old Companies Act, 1956. Under the present law in India, new share warrants are not issued because they are risky and do not give proper ownership records.
Difference Between Share Certificate and Share Warrant
| Point of Difference | Share Certificate | Share Warrant |
| Meaning | Proof of ownership of shares is given to a named shareholder. | A bearer document that gives ownership to whoever holds it. |
| Issued To | A specific person whose name is entered in the register of members. | The bearer of the warrant (not registered in the company’s books). |
| Legal Value | Conclusive proof of membership in the company. | Does not make the bearer a member in the company’s records. |
| Transfer | Can be transferred only through legal process and registration. | It can be transferred just by handing it over. |
| Eligibility | Can be issued by both private and public companies. | Can be issued only by public companies with government approval. |
| Evidence of Ownership | Safe and recorded in the company’s register. | Ownership passes by delivery, but is not recorded in the company’s register. |
| Dividend Payment | Paid to the person whose name is registered with the company. | Paid to whoever holds the dividend coupon attached to the warrant. |
| Form | Physical or electronic (demat). | Physical bearer document with coupons. |
| Usage Today | Still used and legally valid. | Almost outdated, rarely used today. |
| Risk | Safe because the owner’s name is registered. | Risky because if lost or stolen, anyone holding it becomes the owner. |
Example
- Share Certificate Example:
Mr. Arjun buys 500 shares of a private company. The company issued him a share certificate in his name. His name is entered in the company’s records. He is a legal member and can vote in meetings, receive dividends, and sell his shares legally. - Share Warrant Example:
XYZ Ltd., a public company, issues a share warrant for 500 shares. Whoever holds this warrant can claim dividend coupons and enjoy ownership rights. If the warrant is lost or stolen, the new holder will be treated as the owner, which makes it risky.
Which One is Important Today?
In the past, both documents were common. But today:
- Share Certificates (or their electronic version, Demat) are the standard proof of shareholding.
- Share Warrants are almost not used because:
- They are risky (easy to lose or misuse).
- They hide the real owner from the company records.
- They are not allowed under the current Companies Act, 2013.
- With demat accounts, ownership is recorded safely and securely.
Conclusion
Both share certificates and share warrants show ownership of shares, but they are very different. A share certificate is issued in the name of a shareholder and is safe, legal, and still used today. A share warrant is a bearer document that gives ownership to whoever holds it, but it is risky and almost outdated.
In short:
- If you hold a share certificate, you are a legal member of the company.
- If you hold a share warrant, you are only the bearer and not officially registered as a member.
For modern investors, share certificates (mostly in electronic demat form) are the only relevant and secure proof of ownership.
Related Service
